Enjoy the second edition of our bi-weekly newsletter discussing interesting insights into accounting standards.
Dear reader,
welcome to the second edition of my newsletter! You can improve both your accounting theory and practice by reading my easy-to-understand summary.
Topic of the week: The IASB published final illustrative examples on Disclosures about Uncertainties in the Financial Statements.
For your practice: Six examples use climate-related patterns for enhancing specific disclosures about uncertainities and risks in the financial statements. They help in dealing with uncertainity-related disclosures under the following standards.
IAS 1/ IFRS 18 Presentation of Financial Statements;
IAS 36 Impairment of Assets;
IAS 8 Basis of Preparation of Financial Statements;
IFRS 7 Financial Instruments: Disclosures;
IAS 37 Provisions, Contingent Liabilities and Contingent Assets.
Uncertainities or risks now and in the future. Use judgement and concentrate on material items in your financials.
What else is new at the standard setter?
Exposure Draft of the IASB "Risk Mitigation Accounting" is about:
Accounting for risk mitigations of repricing risk. Repricing risk is a type of interest risk that arises from differences in the amount and timing of financial instruments that reprice (=change) to benchmark interest rates.
For whom? For entities exposed to repricing risks (concerning new and existing financial instruments), mainly financial institutions. Open for comment until 31 July 2026.
My regular column on LinkedIn 'Accounting Standards in 15 Seconds' covered IAS 24: Related Party Disclosures and IAS 26 Accounting and Reporting by Retirement Benefit Plans.
IAS 24 in one sentence: this standard is about disclosure of transactions, outstanding balances, incl. committments and relationships with related parties (can be a persons or an entity). Related parties may enter into transactions that unrelated parties would not.
IAS 26 in one sentence: this standard applies to retirement benefit plans if they are reporting entities separate from the employers of participants in the plan. IAS 26 complements employers' plans (IAS 19 Employee benefits).
Lesson for your accounting practice:
Understand that revenue and income are separate line items in the financial statements with different sets of rules (accounting policies) around them:
UK travel retailer WH Smith Plc recognized income from supplier promotions in full & at once rather than spreading them over the contract term. The latter would have been the correct way of accounting based on the supplier agreements. The consequence: overstatement of income in the period, no impact on revenue.
Business important? Revenue impacts a different set of KPIs/ Management Performance Measures than (Other) Income.
Quizzes on Sunday!
Quiz "Revenue or Income" tested your knowledge concerning contributions from holders of entity claims (ordinary and preference shares). These might result into: a) revenue, b) income or c) increase in equity?
Quiz "Uncertainities and Disaggregation of Items in the Financial Statements" (IAS 1/ IFRS 18) tested how familiar you are with the disagreggation rules in the disclosures. Scenario asked what is the most appropriate disclosure for two items of PP&E with different risk profiles (battery vs. non-battery stage units).
Highlight of the Week
How AI is shaping the future of accounting profession by the Wall Street Journal:
AI Is Co-Writing Financial Reports. Here’s Why That Matters. - WSJ
Have a good accounting week.
Best,
Barbora